http://www.urbaninsuranceagency.com/insurance-articles/170/aig-and-state-guaranty-funds.html
AIG and State guaranty funds
by Larry Lubell
The financial crisis in the US financial markets continues to spin out
of control. In the latest, and largest government bailout ever for the
Federal Reserve, the FED came to the rescue of American International
Group Inc.(AIG) with an $85 billion dollars of taxpayer money/ In
exchange the government will get a 79.9 percent stake in one of the
world’s largest insurers as well as the right to remove senior
management.
AIG shares sank $1.54, or 41 percent, to $2.21 in afternoon trading
Wednesday. They traded as high as $70.13 in the past year. Clearly
wiping-out hundreds of billions of investors money.This can be
particularly devastating for those workers of AIG that had large
amounts of company stock.
“The administration is approaching an unprecedented step, but
unfortunately we are living in unprecedented times. Hearing of these
plans, you have to stop to catch your breath. But upon reflection, the
alternatives are much worse,” said Sen. Charles Schumer, D-N.Y.
In a statement late Tuesday, AIG’s board of directors said the loan
will protect all AIG policy holders, address concerns of rating
agencies and buy the company time to sell off assets.
Hank Greenberg, the key figure credited with building AIG into the
world power-house, then replaced as CEO three years ago as part of an
accounting probe; when interviewed today stated.
“No, I think it’s an unfair appraisal,” said Greenberg, “You know,
there are many things that contributed to this unfortunate episode.
after I left the company, all the risk management procedures that we
had in place were obviously dismantled. I can’t explain that. There’s
a new board of directors. One should be asking that board of directors
what they did and why.”
Greenberg said he has lost “my entire net worth. Literally, my entire
net worth.’
“Worked 40 years building the greatest insurance company in history,
one that everyone in the world envied who was in this industry. I’ll
get by, but my heart goes out for the thousands and thousands of
employees and their families who shareholders and not only in the
United States but worldwide. That is a tragedy,” he said.
While the parent holding company, is based in New York, it is really a
large collection of individual insurance companies licensed state by
state; each monitored by state insurance regulators. AIG, despite
financial issues; states its insurance companies were solvent and have
the capability to pay claims. Anyone covered by AIG insurance
companies can expect their claims to be paid as usual, said Scott
Kipper, the Insurance Division administrator
“There is a procedure for insolvencies, and it involves trying to
settle the liabilities of the company to the maximum extent possible.
To the extent they can’t be met, there are guaranty funds in every
state that cover certain types of insurance,” said Robert Hartwig,
president of the Insurance Information Institute, a nonprofit industry
group.
Most companies are covered by paying into there state guaranty funds
Some companies are non admitted, and do not pay into the fund,
therefore their insureds are not protected. Urban Insurance Agency,
does not place business with NON ADMITTED companies.
AIG scrambled Monday to reassure worried insurance clients. “Insurance
policies written by AIG companies are direct obligations of our
regulated insurance companies around the world. These companies are
well capitalized and meet or exceed local regulatory capital
requirements,” said Peter Tulupman, a company spokesman in an emailed
statement.